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Dual Landownership as Tax Shelter: How Did the Chinese Solve Ricardo's Problem?

Yang, Helen (2012): Dual Landownership as Tax Shelter: How Did the Chinese Solve Ricardo's Problem?

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Abstract

A conventional theme of the literature on customary land tenure is that multiple ownership and complex tenure systems are obstacles to agricultural development. By studying the persistence of dual landownership in preindustrial China, I hypothesize that complex property norms could be the endogenous outcome of collective choice under institutional constraints, thus may not be inefficient per se. Dual ownership acted as a tax shelter for heavily taxed peasants who colluded with lightly taxed gentry to maximize the value of land. I show empirically that as gentry's tax privilege declined after the tax reform, peasants started to consolidate landownership.The dual owner system provided a solution to the land-use- inefficiency problem emphasized by David Ricardo: Under unequal taxation, land would end up owned by those with stronger political influence and preferential tax rates rather than by those best able to use it.

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